Severn Trent mounts challenge to WPD's Hyder plans

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The Independent Online

Severn Trent, the water company, yesterday launched a legal challenge to Western Power Distribution's plans to outsource the running of the water operations of Hyder, the Welsh utility.

Severn Trent, the water company, yesterday launched a legal challenge to Western Power Distribution's plans to outsource the running of the water operations of Hyder, the Welsh utility.

It also emerged that the Japanese bank Nomura, the losing bidder in the battle for Hyder, had been willing to offer more than the 365p-a-share successful bid from WPD, a US utility joint venture. The bid battle was settled by the Takeover Panel by the use of a final round of sealed offers.

Severn Trent yesterday went to the High Court, issuing a writ to challenge the £1bn contract that WPD has agreed for United Utilities, the water and power group, to run Hyder's water business. It is alleged that WPD broke European procurement law by not putting the contract - the first of its kind in the water industry - out to competitive tender.

Brian Duckworth, managing director of Severn Trent, said: "We'd like to have had a crack at this contract ourselves. This is setting a precedent, we believe that we have to create a competitive model for the industry."

Hyder's water operations make up four-fifths of the enterprise value of the company, but WPD has made it clear that it is interested only in Hyder's electricity distribution business.

It is thought the development will not jeopardise WPD's bid but it could seriously delay its plans to hand over the water business to another operator after it takes control of Hyder.

The news on Nomura's bid, which came from a statement from the Panel yesterday, will add weight to the charge that the sealed bids process deprived Hyder shareholders of the highest price. It was already known that WPD had also been willing to pay more than 365p a share, but did not need to, as Nomura did not take part in the sealed bids.

The statement revealed that Nomura proposed re-running the sealed bids, and committed itself to offer more than 365p a share, if it was re-staged.

The Panel announcementpinned the blame on WPD's advisers, Schroder Salomon Smith Barney, for missing a deadline.

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